- Gold prices snapped a two-day corrective decline on the final trading day of the week.
- Optimism over China’s reopening derailed the dollar’s rally, while U.S. Treasury yields retreated.
- Gold prices are eyeing the 50-simple moving average support on the 4-hour chart amid a bearish RSI.
Gold prices were modestly flat so far on Friday, as bears took a breather after two straight days of corrective losses from a three-month high of $1,787. Gold was set to end the week lower despite trading near its best level since August.
Dollar retreats despite hawkish Fed comments
Gold prices are consolidating recent losses as a rally in the U.S. dollar faded in Asian markets on Friday. Investors have become more optimistic about the prospects of China’s reopening, especially after Goldman Sachs said on Thursday that China’s gross domestic product (GDP) growth may pick up in the second half of 2023 and 2024. After the impact, according to Bloomberg, the spring strategy.
In addition, the dollar also bore the brunt of the USD/JPY sell-off after Japan’s consumer price index surged to a 40-year high and sparked expectations of a hawkish turn by the Bank of Japan (BoJ). Cooperating with the U-turn of the U.S. dollar, it will form a certain support for the price of gold.
The dollar rebounded strongly in tandem with U.S. Treasury yields on Thursday following hawkish comments from U.S. Federal Reserve policymakers. St. Louis Fed President James Bullard said the benchmark interest rate may need to rise to 7% to put downward pressure on inflation. “To get sufficiently tight, the policy rate will need to increase further,” he added. As of writing, the benchmark 10-year U.S. Treasury yield jumped to 3.76% from a six-week low near 3.70%.
Focus turns to U.S. existing home sales data
Weak U.S. producer price index (PPI) and consumer price index (CPI) data fueled expectations for a 50 basis point (bps) rate hike by the Federal Reserve in December, another sign of a cooling U.S. housing market that could fuel the dollar’s weakness. The latest decline. On Thursday, U.S. building permits fell 2.4% to 1,526K, the lowest level since June 2020, while housing starts fell 4.2% to 1,425K.
15:00 GMT on Friday will see US Existing Home Sales fall, forecast to drop slightly to 4.38 million in October, compared to 4.71 million previously. A sharp disappointment in U.S. data could reinforce expectations for a slower pace of Fed tightening. The resulting dollar weakness could revive gold’s uptrend. However, the weekend’s flow could end and leave gold bulls on edge, with attention turning to next week’s Fed minutes.
Gold Price Technical Outlook: Four Charts
On the four-hour time frame, gold prices are trading lower while trading below the horizontal 21 simple moving average (SMA) of $1,771.
Downside risks remain intact with a rising wedge pattern and a bearish Relative Strength Index (RSI) currently at 49.40.
Sellers now need a sustained break below the weekly low at $1,755 to challenge the psychological $1,750 barrier, where the bullish 50-SMA coincides. The next downside target is at the round figure of $1,740.
On the upside, buyers need to find acceptance above the 21-SMA to revive the uptrend. The rising wedge support-turned-resistance at $1,794 will be their next target.